Home prices remain up to 4 times higher than what young Canadians can afford: new study
Despite recent price drops, young Canadians still squeezed between flat earnings and sky-high housing markets; experts call on federal parties to expand National Housing Strategy in election platforms
June 12, 2019
For immediate release
Average home prices in Canada are more than double what is affordable* for younger Canadians, according to new research that illustrates the state of housing affordability in every province and major cities within them.
Released by Generation Squeeze, the study shows that Canadians between the ages of 25 and 34 continue to straddle a massive gap between housing prices that remain at near-historic levels in key parts of the country, and average earnings for this age group that have been relatively flat, if not down, for several decades. Data in this report show that:
- Average home prices in Canada would need to fall $223,000 – about half of the current value – for someone aged 25-34 to be able to afford an 80% mortgage.
- Alternatively, typical full-time earnings for this age group would need to increase to $93,400/year – nearly double current levels.
- It now takes a typical young person 13 years to save a 20% down payment on an averaged priced home in Canada, compared to the five years it took when today’s aging population started out as young adults around 1976.
“Despite recent nominal declines in housing prices compared to previous years, the gap between the cost of owning a home and the ability of younger Canadians to afford it is at critical levels. If housing markets are levelling out, they remain untenably high,” said Dr. Paul Kershaw, lead author of Straddling the Gap: A troubling portrait of home prices, earnings and affordability for younger Canadians, and founder of Generation Squeeze.
In advance of this fall’s federal election, experts are calling on all parties to commit to expanding Canada’s National Housing Strategy in their election platforms. The current strategy, which is largely a social housing plan, is designed to support about 530,000 of the most vulnerable Canadians. However, around 1.2 million more are believed to be in core housing need, many of whom earn decent incomes but remain priced out of the market.
“A second phase of the National Housing Strategy must be launched to ensure all Canadians can afford a good home — whether renting or owning — by addressing failures in the broader housing market,” said Kershaw.
Unsurprisingly, the study shows the housing affordability gap for younger Canadians is most severe in Vancouver and Toronto, where housing prices are four and three times more expensive than what a typical younger buyer can afford. However, the study also shows that problems extend to places like Victoria, Kelowna, Hamilton, Kitchener, Ottawa, Edmonton, Calgary, Montreal and Halifax.
For a breakdown of affordability findings by province and major city, please see the full report: Straddling the Gap: A troubling portrait of home prices, earnings and affordability for younger Canadians
Generation Squeeze has worked with academics and other experts from BC, Ontario and Quebec to publish a new four-part housing policy framework that all federal parties are being called on to adopt in advance of this fall’s election. Released by the Housing Research Collaborative, core recommendations include:
- Pursue a second phase of the National Housing Strategy that expands the current focus on social housing to address factors in the broader housing market that have contributed to home prices leaving behind earnings in many regions of Canada.
- Adopt the Canada Mortgage and Housing Corporation’s (CMHC) goal and timeline to ensure all Canadians can afford a good, secure home by 2030.
- Embrace “Homes First” as a guiding principle, whereby housing is treated as a place to call home, not a way to get rich. Homes First implies policy targets that would ensure home prices don’t grow faster than local earnings.
- Enact policies that address both demand-side and supply-side challenges, rebalance the tax treatment of earnings and housing wealth, and scale up non-profit housing.
“In the lead-up to the fall federal election, we need all parties to commit to bold action that builds on some of the progress we’ve seen emerge in the past couple of years,” Kershaw said. “Now is not the time to slow down efforts to modernize Canada’s housing market by simply hoping the massive gap between home prices and local earnings will resolve itself.”
*Affordability means Canadians do not spend more than 30% of their pre-tax earnings on housing, according to the CMHC
Read the policy framework: A Housing Policy Framework and Policy Options for the 2019 Federal Election
For media inquiries, contact:
Dr. Paul Kershaw, University of BC policy professor, and Founder, Generation Squeeze
firstname.lastname@example.org 604 761 4583.
Sutton Eaves, Co-Executive Director, Generation Squeeze